7 posts categorized "Supply chain"

03 June 2013

Fronesys is pleased to announce that our consortium (Fronesys and its partners Advancing Sustainability, as consortium leader, and Sustain) has won a WRAP Framework Contract (FRA052 Resource Efficiency in Products) through which we can provide a tailored support package advising on a range of issues from accessing finance to marketing and business strategy.

WRAP(Waste & Resources Action Programme) is a not-for-profit private company backed by funding from the Department for Environmental Food and Rural Affairs, the Scottish Government, the Welsh Assembly Government, the Northern Ireland Executive and others.

28 December 2012

Andy Wood, ceo at Adnams, a modern brewing company built around a heritage brand, shares the story how his company has placed resource efficiency front and centre of its sustainability drive. The Adnams story is an excellent example of a mid-sized business willing to explore how to create and sustain value from a long-term perspective. The Andy Woods interview was conducted by Jyoti Banerjee.

Adnams is a family business that has been brewing beer in the south-east of England for over 125 years. At the turn of the millennium, the company felt that the competitive landscape was shifting and it needed to change its approach. "We were a small, slow-moving, top-down autocracy," recalls Andy Wood, CEO at Adnams.

The review of the business environment pointed to some massive changes:

There was a lot of consolidation taking place at the top-end of the market, while the specialist end of the market was fragmenting.

The big international brewers put their ale brands to one side and focused on lager, while a host of new micro-brewers came into the market, focusing on local production. Adnams sat right in the middle of this, being about thirty times the size of the largest micro-brewer but a long way from the scale of the multi-national beer companies.

Fossil fuels were going up in price. The company modelled a number of alternative scenarios pointing to an urgent need to re-engineer how the company used energy in its operations.

While preparing for the long-term changes they could see coming, the company sought to introduce a cultural values programme. "We wanted our values to be real and tangible," said Wood. "We challenged ourselves to move the business forward. We looked at how carbon pricing would impact our business model, the ways in which we managed people, the level of customer service we provide, and our brand positioning."

The outcome of the long-term thinking work continues to drive the business forward today. The company sought to improve its operational efficiency through focus on carbon emissions, which helped uncover inefficiencies, but also opportunities to do things in a new way. "We encouraged our architect firm to push sustainability ideas into the new distribution centre they were designing for us. The innovation in the new centre created a raft of interest for us in the market," Wood recalls.

Adnams learned how to apply sustainable thinking to its product lines when it co-created East Green, a low-carbon beer, alongside retailer Tesco. A raft of efficiency changes were introduced by careful examination of carbon emissions in the company’s supply chain.

Adnams picked the twelve farms closest to the brewery (out of 40 farm suppliers) to supply the hops in order to lower carbon miles

It used a bottle that was a third lighter than the normal Adnams bottle

The beer was lightly malted in order to save energy

The brewhouse is energy efficient, and the storage facility has a natural roof that takes 100 tonnes of carbon out of the atmosphere annually, and needs no artificial heating or cooling to maintain temperature to within 2 degrees centigrade

It was not just carbon and energy savings that came into focus through the initiative. Adnams found that gray water recycling enables the company to deliver a water consumption ratio per pint of beer produced of 3.1, versus an industry average of 8.

The current efficiency journey in Adnams is focused on waste streams. The company produces a waste/moisture/yeast waste stream, known as ullage, which used to be thrown away, and the company had to pay a third party to do it. Instead, it built an anaerobic digester that turns the nutrient-rich waste stream into energy. The ullage waste stream at Adnams amounts to 5000 tonnes a year, but the anaerobic digester can consume 12,000 tonnes annually. So Adnams now works with local pubs, hotels, retailers and factories to put their food waste into the digester in order to generate bio methane.

The learnings from East Green beer were deeply impactful on the working of Adnams. Today, every beer the company makes benefits from the lessons learned in creating a low-carbon beer. Plus, the company has a new-found confidence in what it can and cannot do. In 2009, 4% of its beer volume came from new products. In 2012, new products contribute nearly a quarter of company volumes. In the context of a dynamic market where the consumer seeks out products that are new and different, Adnams has a new-found ability to offer innovative products that are differentiated from its core brands.

"We put a big focus on local sourcing," says Wood. "This has given us reputational enhancement in the local community."

The company needed a way to tie together its various long-term programmes, and decided to define a brand that could tell the story of the company. As Wood points out, "We are a heritage brand but we are a modern company." The company’s products reflect that. It has core products that have been in place for decades, while a host of new products reflect the changing trends in the market. "The consumer has become interested in the new and different. Our new and different products showcase what we can do. We are, undoubtedly, in the fashion business," says Wood.

Andy Wood is absolutely clear that the new-look Adnams fits the aspirations of its stakeholders: its customers, suppliers, staff, shareholders and local communities. As he points out, "Trust has been eroded greatly in business. People are very cynical about business. But they are not cynical about businesses where there is provenance and a story to match." The last point resonates with Adnams as a company today.

10 September 2012

Puma, the German sports goods company, is searching for alternative materials it can make its products from, shifting from its traditional use of virgin raw materials like leather and rubber. In doing this, it is one of many companies in its industry seeking to find more sustainable ways to source and sell its products. But the journey Puma has taken may well have given it an innovation advantage over its competitors.

The genesis of Puma’s sustainability efforts came from the attacks sports goods companies were receiving from activists regarding their use of Asian sweatshops. The company’s initial attempts to engage with its supply chain were based on the industry playbook, auditing its key suppliers and putting good practice standards in place. But Puma went further than its competition in one respect: it sought to create a single model by which all of the company’s external social and environmental impacts can be compared.

Puma chose to denominate its external environmental, social and economic impacts in monetary terms. As a result, the business is able to make comparisons of these impacts in a holistic way across the organisation. Plus, it gained insights on how to make business decisions, as it was looking at a much wider set of data than it had before.

One of its early lessons from the analysis was that its biggest environmental impacts were in its tier-four suppliers – those who source raw materials from nature. For a company that makes its sports shoes from virgin leather and rubber, this was pretty bad news. Both its key raw materials were competing for scarce planetary resources on many different fronts: land use, water, the greenhouse gas emissions of cattle, deforestation in order to grow cultivated raw materials, food versus non-food cultivation and so on. The list is potentially endless.

Puma’s first attempt at using alternative raw materials resulted in the re-tooling of one of the company’s most iconic products, the “Suede” shoe dating back to the 1970s. What Puma did was to dump the virgin leather and rubber used in the original. Instead, the rubber came from recycled tyres and the shoe’s uppers were made from rice husk, a waste product from rice processing. The result was the Puma “Re-Suede”.

The lessons from the Re-Suede were extensive. Every part of the Puma shoe-making process was impacted. Designers had to learn to work with new materials, which had to be sourced from different suppliers to the ones that Puma usually works with. The rice husk uppers made for a lighter shoe, compared to a leather shoe. As a result, shipping costs were lower, which Puma emphasised with new lightweight packaging for the Re-Suede. Overall, Puma estimates a savings of fifteen tonnes of carbon emissions for every ten thousand pairs shipped. And the consumer needed to be told a different marketing story. Thanks to the shoe’s sustainability credentials, a shoe made from waste materials and which cost less to ship had a higher selling price than the traditional shoe, and consumers were happy to pay that because they were buying the overall story of how the shoe came about.

But the changes could go even deeper. What Puma has done through its environmental analysis is create an environmental profit and loss account, which monetises the impacts that Puma makes on a number of different factors, such as greenhouse gas emissions, water consumption, acid rain and smog precursors, waste and impacts on land use. In effect, these are all going to be negative on a profit and loss statement. By publishing its environmental P&L, Puma is simply stating what had been left unsaid before: most environmental impacts are free to the company, but if these externalities were to be valued, they would reduce the profits of a company in monetary terms. Puma's intention is to extend this environmental P&L to cover its social and economic impacts as well, some of which will be negative in monetary terms, while others could be positive.

Puma's work on its environmental, social and economic profit and loss statement has been done with assistance from PwC, the consultant, and Trucost, the environmental data specialist (and a Fronesys partner).

Will the world care about Puma's disclosures? Currently, companies are judged on financial profit alone. Many financial analysts have neither the understanding or the tools to know what to do with the depth and breadth of information on offer from Puma. In many instances, the investment horizon for decision-making is the quarterly report. One study found that of all the shares traded on the London Stock Exchange, 40% were held for less than 24 hours. Such short-termism is diametrically opposite to the long-term changes that a company like Puma is seeking to bring in place.

Many companies are seeking to find alternatives to their raw materials, as Puma is. But Puma has the advantage of a wholistic model that enables it to understand and value its decisions across financial, social environmental and economic dimensions. Of this stuff will capitalism be crafted in the next hundred years

05 September 2012

In the face of planet-wide resource depletion and huge volatility in raw material pricing, it is time for the circular economy. The tech industry is well-placed to make this move. But will it? Fronesys in in discussion on the issue with the International Business Leaders Forum (IBLF).

At a time when the arrival of a new phone from Apple promises to create an intense cycle of device replacement among millions of consumers across the world, it is worth asking whether such a cycle of economic activity - make, sell, use, throw away - really makes sense. Does it deliver value to the tech industry making products that are intensive in their raw material usage but short-lived? Does it make sense to the consumer who often throws away a perfectly usable product in search of product nirvana as espoused in global media advertising?

Business-as-usual (BAU) growth of ICT hardware and services is being driven by a combination of:

Such ubiquitous connectivity brings with it many benefits, but also a number of dis-benefits. Market forces will naturally drive many of the benefits (social, economic and environmental), but the ICT industry can do much to address additional benefits that will not arise as a matter of business as usual, as well as responding to the negative sustainability impacts that result, directly and indirectly, from their operations and value chains.

Circular thinking

As the Ellen MacArthur Foundation laid out in its recent report, Towards the Circular Economy, "The call for a new economic model is getting louder. In the quest for a substantial improvement in resource performance across the economy, businesses have started to explore ways to reuse products or their components and restore more of their precious material, energy and labour inputs. The time is right, many argue, to take this concept of a ‘circular economy’ one step further, to analyse its promise for businesses and economies, and to prepare the ground for its adoption."

The current economy is essentially linear: remove materials from the planet, make a product, use it, throw it away. While some recycling does take place, for many materials, including some very scarce ones, it remains the exception rather than the norm. Driving efficiencies into the linear economy (for example, lower cost manufacturing) has actually made it increasingly difficult to repair and reuse products.

The Ellen MacArthur Foundation report concluded that adopting a more circular economy approach, whilst being disruptive to many existing business models, actually offers a significant business opportunity. In Europe the report found even partial adoption of circular economy principles could provide a net material cost saving opportunity of up to USD 630 billion per annum. In China, concerns surrounding resource scarcity led to the adoption of a Circular Economy law in 2009.

"Instead of the goal of maximum linear growth in GDP," said Ian Cheshire, CEO of Kingfisher / B&Q, "we should be thinking of maximum wellbeing for minimal planetary input. That starts to challenge business to go beyond efficiency gains, useful though they are, and really redesign their business models. The wellbeing challenge also forces us to think about our total impact as a business rather than the narrow shareholder value lens, since businesses that do not create broader social value will again not survive the longer term."

Benefits

The technology industry could be (or arguably should be) at the vanguard of the circular economy for a number of reasons:

1. It is dependent on a number of scarce materials and is exposed to availability constraints and price volatility.

2. ICT equipment often becomes obsolete long before it fails – in fact the industry has often been accused of built-in obsolescence.

3. The ‘cloud’ is already offering ‘infrastructure as a service’ (IaaS) – typical of the new business model thinking surrounding the circular economy.

As Gavin Pattersion, chief executive of BT Retail pointed out, "Digital technology will play a crucial role in providing the information needed to create iterative logistics and restorative systems". In agreement with this view was Chris Dedicoat, president, EMEA, Cisco: "The Circular Economy is a blueprint for a new sustainable economy, one that has innovation and efficiency at its heart and addresses the business challenges presented by continued economic unpredictability, exponential population growth and our escalating demand for the world’s natural resources."

So what sort of impacts should we see if the Circular Economy were to work in practice?

New business models

Using the circular economy model as a tool to drive improvement and innovation

Such thinking may not help Apple's new iPhone 5, but surely we must put the mechanisms in place so that the iPhone 6 and its peers from across the industry offer a new social contract between the tech industry and the consumer.

22 June 2011

Today's corporate reporting model looks broken. It is dominated by a compliance mindset, particularly in America, with an inordinate focus on technical things, not strategy. It is so separated from internal reporting that boards are unable to engage with it for their own work. And the accompanying governance model is more about lists and tick-boxes.

Paul Druckman, the author of this diagnosis of the ills of corporate reporting, was speaking at the DVFA's Integrated Reporting convention in Frankfurt, which brought together corporate reporters, auditors and investment professionals for an appraisal of where Integrated Reporting (IR) has got to. Paul, a partner at Fronesys, is perfectly placed to map the future of IR in his role as chairman of the International Integrated Reporting Committee (IIRC), which brings together some of the world's leading organisations in an effort to blend financial and non-financial reporting into an integrated whole.

Here are some key points from Paul's talk and the ensuing discussion:

Currently there is an undue focus on the financial aspects of a business, both in reporting and in investment methods.

There is a real lack of strategic focus in corporate reporting, even though boards and investors are strategic in their own thinking and activities - clearly, the current reporting model is serving neither.

Auditors spend an inordinate time doing technical things that few care about

Integrated reporting is not about combined reporting: such as adding a CSR report to a financial report. Michael Krzus, another speaker at the convention, sought a move away from 400 page annual reports to management reporting that can be accessed via smart web tools.

IR represents a move away from "stakeholder-driven reporting" to the mainstreaming of what is "strategic and natural," according to Paul Druckman. But Michael Krzus argues that such an approach is not about taking away detail that a stakeholder, such as a single-issue NGO, might desire. One fears that having to assemble the material that is of interest to the single-issue NGO may defeat any of the gains from a streamlined reporting process.

IIRC is bringing out a discussion paper in July 2011, and is seeking companies that would be prepared to pilot IR in their own reporting work. Currently, Novo Nordisk, BASF and Philips have already put together pilot IR reports.

What does an IR corporate look like? It distinguishes short, medium and long-term perspectives; it facilitates a change in behaviour among investors and stakeholders, who may not be prepared to think in this integrated way; it is more concise than current reporting, and it focuses on the creation of value in and through the business.

Fundamental to the IR model is the concept of capitals, and how they should be assessed: financial, manufacturing, human, intellectual, natural and social capitals.

Realistically, IR is only going to succeed if an organisation is able to concentrate on its material issues, but few organisations understand how to assess materiality, particularly when it comes to non-financial metrics. And even if IR brought a focus on materiality, will it change investment behaviour, at a time when 60% of trades in the US are made by computers, according to Leon Kamhi of Hermes? In fact, Ralf Frank, the head of DVFA asked a pertinent question about reporting as a whole: "Who reads financial reports in this day of Bloomberg terminals?"

IR has the opportunity to bridge a number of disconnects in corporate reporting:

Financial vis-a-vis non-financial reporting: in many organisations, the people preparing the financial reports have no idea where the sustainability reporting teams are even located, let alone how they might integrate the two.

External reporting vis-a-via board strategy: if external reporting is not focused on what boards are focused on, then it is neither strategic or material.

External impact data (supply chain and customer data, for example) vs internal processes: very few internal processes today, nor the accompanying business application software, track the external impacts of the company in a data-driven way.

Financial auditors vs non-financial assurance: Novo Nordisk, one of the companies piloting an IR report, found that they had to bring together the teams from their auditor that did the work on financial audit and non-financial assurance. Although they work for the same professional services company, they are completely unconnected from each other.

The DVFA convention continues to a second day, which will include a presentation by another Fronesys partner, Jyoti Banerjee, exploring the data used in sustainability reporting.

11 May 2011

When receiving an award at Ceres 2011 on behalf of Nike, the company's vice president of corporate social responsibility spoke about two key themes in reporting: transparency and data. Her quote? "Data is the new oil!" - something we think is really important at Fronesys.

There was also plenty of talk about Nike's experience being a journey of "data mashing" - with Nike now benefiting from the data mashing but having had to go through a great deal of pain to get there. Again, just like data and materiality, data mashing is a key ingredient of the Fronesys proposition.

08 May 2011

The vast majority of the purchasing and investment decisions made by companies, public sector organisations, investment funds and individuals are made purely on the grounds of financial numbers and are based on a short-term perspective. But there is momentum for a change in behaviour which is gathering pace, with longer-term sustainable decisions at the core.

It is not only financial data and models that are relevant to the business models of today and tomorrow; non-financial information sets, including data on environmental, social and governance impacts, inform these decisions. Extended use of such rich information will change our understanding of business, and will require us to transform the tools and processes by which we conduct business today.

Solution

The vision of Fronesys is to help catalyse this behaviour change, while the commercial opportunity is what makes the Fronesys proposition so compelling.

Today, technology and the right data allow enterprises and individuals to seek sustainable solutions in their actions, if only they knew how to bring the right kind of information together, and from where. Fronesys offers value-added products, analytics and advisory services to enable its clients to build an integrated environmental, social and governance (ESG) platform that is right for the organisation’s needs. Our vision is that organisations have a single ESG concept integrated into their day-to-day management information systems so that all their decision-makingincorporates a full understanding of their long-term and short-term sustainability impacts.

Business model

Fronesys provides services in the following areas:

• Advisory services to corporate organisations that seek to create a single framework to manage their environmental, social and governance impacts across internal and supply chain dimensions, and address their most challenging sustainability problems.

• Consulting services to data providers, service providers and other players in the ESG marketplace to help them create and commercialise appropriate products and services

Our skills are in having a deep understanding of the way such an integrated ESG platform is created and what data is needed, from within an organisation and from third parties, to make it operable. In this new era, which demands technology, data and ESG expertise, Fronesys provides just that from experienced and credible experts with state-of-the-art products and services.

Fronesys is not an environmental activist with little or no understanding of business issues. Instead, it brings together deep knowledge of business sustainability, real-world data metrics, software systems used by management, and investment strategies in order to create a data-driven sustainability environment that allows Fronesys clients to base their business decision-making on a richer platform than is currently possible.

Team

The architects of Fronesys are specialists in their fields:

Jyoti Banerjee specialises in the business performance of technology companies. He has helped many of the world's leading software companies develop strategies for specific markets and products, including Microsoft, Great Plains, Navision, and JD Edwards. He is also on the board of an investment fund that has 28 investments in ethical businesses in emerging markets of Asia and the Middle East.

Paul Druckman is a leading authority on sustainability and accounting. He chairs the Accounting for Sustainability (A4S) initiative of HRH The Prince of Wales, and the Sustainability Policy Group of the Federation des Experts Comptables Européens (FEE). He is a former President of the Institute of Chartered Accountants in England and Wales (ICAEW), following a career in the software sector.

Chris Tuppen has been involved in sustainability for over twenty years with expertise in organisational sustainability strategy, reporting, metrics, target setting, climate change, risk assessment, governance, thought leadership, stakeholder dialogue, media support, smart technology applications, public affairs interaction and international collaboration. He has in-depth expertise of the information and communication technology industry and was previously BT’s Chief Sustainability Officer.